Smartcards are good — Aadhaar is better

While the smartcards are good replacing the card with Aadhaar is a better long term option. The replacement cost for the cards is significant and becomes a burden on the system that is not necessarily required. It also delays the government from focusing on the longer term systemic problem of inadequate infrastructure and the disenfranchisement that comes along with it. This study, a long with many others, clearly shows the value proposition of Aadhaar and with it the invested interests to keep the status quo.

The study conducted on a smart card program in Andhra Pradesh, also found that MGNREGA workers spent almost 21 minute less in collecting each payment made electronically compared with manual transfer, reports Business Standard.

About 84 percent of the MGNREGA job card holders and 91 percent of the beneficiaries of Social Security Pension preferred payments through smart cards to the existing mode.

The study showed that the smart card system not only brought down the leakages, but was also significantly cost-effective. It showed that when smart cards were used to deliver cash benefits in like in MGNREGA, the government saved about $4.44 million when time saved is converted into money and $4.25 million in cost of implementation.

“The reduction in leakage is also much larger than the cost of implementation. For example, in MGNREGA, leakage reduction of $38.7 million per year is nine times the total cost of implementing the program,” said Muralidharan, who is an assistant professor in the University of California, while presenting his study during a lecture on ‘Building State Capacity For Programme Implementation: Evidence From Biometric Smartcards in India’ by National Council of Applied Economic Research here on Wednesday.

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Technology has played a major role in streamlining funds allocated for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). According to a study by economist Karthik Muralidharan the decision to introduce payments to beneficiaries through smart cards in Andhra Pradesh has helped the state reduce leakage of funds by as much as 12.2 percentage points.